The SEC’s Regulation Best Interest proposal doesn’t go nearly far enough to protect investors from conflicted financial advice, Sen. Elizabeth Warren, D-Mass., writes in a Bloomberg op-ed.

While the SEC claims its proposed regulation will require brokers to act in their clients’ “best interest,” the regulator doesn’t actually define the term, she writes, echoing other critics.

This lack of clarity confuses investors and brokers alike, according to Warren, “leaving the possibility that judges and corporate lawyers will chip away at the standard over time,” she writes on Bloomberg.

Since the SEC’s new rules would merely require brokers to disclose and mitigate conflicts of interest, it will permit the continuation of “harmful practices” such as sales contests, according to Warren.

In addition, investors don’t have an explicit right to take brokers to court under the SEC’s current proposal, she writes. That omission reduces the odds of the best-interest standard getting enforced, Warren insists.

To “fix its flawed proposal,” the SEC needs to make four primary changes, she writes.

For starters, the SEC’s new rule should apply the fiduciary standard to all financial professionals, the way Department of Labor applied the standards with its now-defunct rule, according to Warren.

“That is what the Department of Labor did with its 2016 rule requiring all financial professionals giving advice on retirement-savings plans to put client interests ahead of their own,” she writes.

The DOL’s rule was officially vacated in June.

Warren argues “there’s little reason” not to apply the fiduciary standard to brokers providing advice similar to what’s provided by investment advisors, who are already held to the more stringent standard.

The senator also says the SEC needs to bar certain practices that result in conflicted advice, such as contests and sales quotas. In addition, the regulator should steer clear of relying on disclosure alone to protect investors, Warren writes, citing studies that suggest brokers are incentivized to make disclosures ineffective when that’s the case.

Finally, the SEC’s proposal should have “a strong enforcement mechanism by allowing investors to sue advisors who scam them,” she writes.

Separately, the Investment Adviser Association is taking issue with the added regulation the SEC’s new rules would impose on its constituents, according to InvestmentNews.

Senator Elizabeth Warren

"We strongly urge the commission not to consider imposing unnecessary and ill-fitting broker-dealer regulation on investment advisors as part of this critically important standard of conduct package," Karen Barr, IAA president and chief executive, writes in a comment letter to the SEC, according to the publication.

According to Barr, advisors shouldn’t be held to a net capital requirement since, unlike brokers, they don’t custody client assets or handle principal trading, InvestmentNews writes. And the IAA also says investment advisors shouldn’t be required to meet licensing, continuing education and account statement requirements imposed on brokers, according to the publication.